Dispute Resolution: What are my options?
A dispute begins when one person makes a claim or demand on another who rejects it. How to approach disputes that arise in your business will depend on many factors. Perhaps you had previously agreed on a particular dispute resolution mechanism. If not, you should consider what is offered by each of the following processes.
Dispute resolution takes many forms, but can be narrowly described as negotiation, mediation, mediation/arbitration, arbitration and litigation. These processes lie on a spectrum, with participants gradually having lesser control over the process and outcome. The various processes also generate different costs and benefits.
Negotiation is a voluntary exercise by which the parties come together either alone or through agents, to discuss a controversy between them. It is particularly useful where there is a lengthy relationship between the parties or is one that both parties have an interest in preserving. However, where parties are of unequal bargaining power, it may be inappropriate. Further, the voluntary aspect of negotiation is also its weakness, as any party can decide to withdraw at any time.
Mediation is similar to negotiation, but introduces a neutral third-party to facilitate discussion and consideration of possible solutions. Mediators will often caucus with parties separately in order to canvass the issues and find areas for compromise. In either negotiation or mediation, it is essential that the participants have the authority to make a settlement. If the appropriate persons are not present, the exercise is futile. To encourage full and open discussions, mediations will normally be done on a “without prejudice” basis and neither party may later call the mediator as a witness in court.
Arbitration provides that a mutually acceptable and neutral third party will make a decision on the merits of the case, after an informal hearing involving the presentation of evidence and oral argument. It may be non-binding or binding, in which case the decision may be legally enforceable. It is frequently adopted in specialized fields where it may be helpful for the adjudicator to have particular expertise, or where a timely resolution is necessary.
Of increasing popularity in commercial disputes, is the use of mediation/arbitration. It provides that the parties will first attempt to resolve their issues via mediation, failing which the third party assumes the role of arbitrator and imposes a decision on the parties. The use of private adjudication has the important benefit of maintaining commercial confidentiality and may result in a more timely resolution of the dispute.
Litigation is time and cost intensive but is sometimes necessary to achieve a just result. Importantly, litigation may be initiated unilaterally, where the opposing party refuses to participate in any other process. It also involves standardized procedures, including timely disclosure of written records and examination of witnesses. A judgment will be enforceable against the other party and will set a precedent for similar claims in future.
In business, ongoing relationships with customers, suppliers and tenants are extremely important. A lawyer can assist you in weighing the pros and cons of the various processes and suggest an effective strategy. The following questions may assist you in selecting the appropriate process:
- Is the dispute over more than just money?
- Is a speedy resolution of the dispute important?
- Is it important to maintain an ongoing relationship with the other side?
- Is it important that the matter be resolved confidentially and in private?
- Do I need to set a precedent for future disputes?
- Will the other side bargain in good faith?
Where there is good faith in reaching a settlement, pursuing negotiation or mediation may be highly beneficial. In addition to saving time and money, the parties maintain control over the outcome and hopefully improve an existing commercial relationship.
Karin Pagé is a member of the Litigation Law Group at Perley-Robertson, Hill & McDougall LLP / s.r.l. Karin can be reached at 613.566.2860 or firstname.lastname@example.org.
This article was originally published in the September 23, 2008 edition of the Ottawa Business Journal.